Litigation Release No. 21364 / January 8, 2010

The Securities and Exchange Commission announced that it filed an emergency enforcement action on January 7, 2010 in federal district court in Massachusetts and obtained a temporary restraining order, asset freeze and other relief against Richard Elkinson in connection with an alleged Ponzi scheme which defrauded investors in at least 12 states. The Commission's complaint alleges that Elkinson, of Framingham, Massachusetts, lured at least 130 investors to invest approximately $28 million with him through his d/b/a Northeast Sales, which he operated out of his home.

The Commission's complaint alleges that since at least 1997, Elkinson offered and sold unregistered securities in the form of promissory notes. According to the complaint, Elkinson falsely told investors that he was in the business of brokering contracts on behalf of a Japanese firm that manufactured uniforms (such as police uniforms and prison uniforms) to be sold to large purchasers such as state and local governments (and even the U.S. Olympic Committee) and that investors' money would be used to help finance specific uniform contracts. The investors received promissory notes signed by Elkinson, with terms that generally required payment within 300 to 330 days and with an interest rate that ranged from 9% to 13%. According to the complaint, however, Elkinson had no relationship with a Japanese uniform manufacturer, and there were no contracts to purchase uniforms. The Commission alleges that, while some investors did receive payments of principal and interest, those payments were made using funds obtained from other investors, and Elkinson was able to keep the scheme going as long as most of the investors kept rolling over their investments. In reality, according to the complaint, Elkinson used most of the investors' money for his own personal purposes, including gambling.

The Commission's complaint alleges that Elkinson violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Honorable Joseph L. Tauro issued a temporary restraining order against further violations of the securities laws, an order freezing Elkinson's assets, an order freezing all proceeds of the misconduct held by others, an order prohibiting the acceptance of additional investor funds, an accounting of assets and an order prohibiting the alteration or destruction of relevant documents, as well as other relief. The Commission also seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against Elkinson.

Elkinson was arrested on January 5, 2010 by Federal Bureau of Investigation and was charged criminally by the United States Attorneys Office for the District of Massachusetts. The Commission acknowledges the assistance of the Federal Bureau of Investigation, the United States Attorneys' Office for the District of Massachusetts and Massachusetts Secretary of State William Francis Galvin's Securities Division.